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Cheng Li: High Expectations for China’s National People’s Congress

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Cheng Li: High Expectations for China’s National People’s Congress

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China’s top leaders will gather in Beijing Tuesday for the highlight of the annual political calendar – the National People’s Congress. This year’s event will be especially important as it installs Xi Jinping as President, and provides clues as to the policy direction for China’s new leadership.

China Real Time caught up with Cheng Li of the Brookings Institution, an influential observer of Chinese politics, to get his view on what to expect.

China Real Time: Some people’s expectations for the NPC seem to be quite low, why is that?

Cheng Li: Many observers are cynical about any substantial policy changes. That’s due to resistance from powerful interest groups, lack of consensus in the leadership, and because Xi Jinping and Li Keqiang need time to consolidate their power and place their people in the right places.

In addition, some of China’s leaders may not want to generate high expectations prior to the NPC meetings. That helps reduce political pressure and could pleasantly surprise the public and business communities if there are major policy initiatives.

There’s also a historical precedent for having big policy decisions come at the third plenary meeting of the Central Committee of the Chinese Communist Party in October following the NPC meeting rather than at the NPC meeting itself.

You have higher expectations?

I believe that we will see the announcement of some important policy initiatives at the NPC, for several reasons:

First, there is a sense of urgency on the part of Mr. Xi to lift public confidence by initiating major policy changes, especially to please the middle class and to do so now rather than waiting another seven months.

Second, Mr. Xi is now in his “honeymoon period,” and he should cash in his political capital to carry out new policies promptly.

Third, in contrast to the previous 10 years when there was often policy deadlock resulting from the factional infighting of the top leadership, Mr. Xi now has a six-to-one concentration of power in the Politburo Standing Committee — a great advantage that should allow him to do substantive things .

And fourth, Li Keqiang is under tremendous pressure to demonstrate his leadership ability.  Evidence seems to suggest Messrs. Xi and Li understand very well their need to support each other.  Their different policy preferences can also complement each other, resonating well in different sectors and with different classes throughout the country.

Still, some eagerly awaited policy changes – like land and hukou reform – are not in the interest of the middle class, and so we may only see lip service paid to some of these policy areas. But from the perspective of the Chinese leadership, the interests of vast numbers of farmers, migrant workers and urban poor should also be addressed.

The priority, I believe, will be to promote growth in the private and service sectors  to further develop the middle class.

One of the big changes people are looking for is reorganization of government. What do you expect here?

There’s a far-reaching plan under discussion to downsize from 28 government ministries to 18.

The National Development and Reform Commission may end up with a smaller role, with less power to approve investment projects and a narrower focus on macro-planning and research. The Ministry of Railways may be merged into the Ministry of Transport. The Ministry of Science and Technology may be abolished, with science functions merged into the Ministry of Education, and technology merged into Ministry of Industry and Information Technology.

The Ministry of Agriculture will grow to encompass both the Ministry of Water Resources and Forestry Bureau.The Ministry of Human Resources and Social Security and the Ministry of Civil Affairs will merge to form a new ministry that may be called the Ministry of Social Work. The National Family Planning Commission may be merged into the Ministry of Health.

The financial regulators—including banking, insurance, and securities—may be merged into an enormous administrative bureau.

We might also see the merger of bureaus dealing with ethnic affairs, religious affairs, overseas Chinese, and Taiwan, Hong Kong and Macao.

All of these changes are subject to last minute alterations. The participants of the Central Committee meeting, held a few days prior to the NPC meeting, may reject or modify some of the plans.  We won’t get all the details at the NPC, but there is a very high degree of certainty that we will see many of these organizational changes.

What does this mean for policy?

Each of these restructurings has a policy implication.

The  NDRC will be reduced to focusing on micro-economic control, especially in terms of the lengthy bureaucratic approval process of projects, and this will provide more autonomy to local governments and accelerate market reform.

Merging the Ministry of Railways into Transport paves the way for a more market-orientated railway system.

The establishment of the Ministry of Social Work may allow for better coordination and implementation of policies regarding employment, social welfare, social security, and social assistance, especially in terms of helping migrant workers settle down in urban areas.

Changes to the Family Planning Commission could have implications for the one-child policy.

The overall objective is to change the function of government, introduce more market mechanisms, and focus on service. Mr. Xi also wants to improve policy efficiency and reduce tensions between different departments.

It is encouraging to see the leadership emphasizing the notion of “service-oriented government.”  The new leaders also claim that they want “small government,” however, the irony is that they will achieve it by creating “big ministries.”

We also expect big personnel changes, correct?

The NPC will select a new State Council, and of the top 10 leaders (premier, vice premiers, and state councilors) confirmed at the meeting, seven will likely be newcomers. At least half of the ministers will be first-timers. This major restructuring will involve a large number of personnel changes, and a few rising stars will emerge as primary contenders for the next Politburo in 2017.

It is also speculated that the People’s Bank of China will no longer fall under the leadership of the State Council and instead will become a more “independent” institution of the same government rank as the Supreme People’s Court and the Supreme People’s Procuratorate. Some scholars in China believe that this proposed change can be viewed as a sign of, or even a significant step to, the reform of China’s banking system.

How do these changes reflect the overall strategy of the Xi leadership?

The new Politburo Standing Committee is not known for its political reform agenda. In spite of — or because of — these top leaders’ weaknesses and liabilities in terms of fundamental political reforms, they will likely opt for bolder and more aggressive economic reforms to lift public confidence.

The leadership will likely alter the current “strong state sector, weak private sector” environment by adopting tax cuts, increasing loans to private small and medium enterprises, and crafting preferential policies for the services sector.

Environmental protection, food safety and public health will likely be discussed in detail at the NPC. A richer, larger and healthier middle class in China would also help to stimulate domestic consumption. The government restructuring seems to be in line with this kind of thinking.


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